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Exam 4: Review of the Accounting Cycle

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Question 71

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The accounting equation my be stated as Assets = Liabilities + Shareholders' Equity.

A) True
B) False

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Question 72

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Adjusting journal entries are made to ensure that all revenues and/or expenses are recognized in the period in which they are incurred.

A) True
B) False

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Question 73

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Deferrals occur when a company receives or pays cash before recognizing revenue or expense in the income statement.

Atlas Corporation sold a used machine for less than its carrying value.This transaction is a(n) ________.

Balance sheet accounts are the first accounts to be listed on the unadjusted trial balance.

Arnold Company provided services to its customers on credit for $25,000.This transaction ________.

If an unearned revenue is initially recorded as a liability,the end-of-period adjusting entry records the expired portion.

If a company does not adjust a prepaid expense initially recorded as an asset,expenses will be overstated.

Accounts are presented in the general ledger in the same order as they are presented in the financial statements.

Which of the following accounts has a normal credit balance?

Permanent accounts do not include ________.

Accumulated other comprehensive income is included in retained earnings.

The final financial statement to be prepared from the adjusted trial balance is the statement of cash flows.

Adjusting journal entries are normally not necessary when cash based accounting is used.

The balance in the common stock account is increased by a credit.

Murphy Corporation engaged in the following transactions during the month of February.Please analyze these transactions indicate whether they cause an increase (+)or decrease (-)in the balance sheet and income statement accounts.

Jones Company sold merchandise on account for $90,000.This merchandise cost $52,000.The company uses the perpetual method of accounting for inventory.What would be the correct journal entry to record the transaction?

The first step in preparing a worksheet is to record the adjusting journal entries.

Prepaid expenses may be initially recorded as liabilities or revenues.

The adjusted trial balance includes only permanent accounts.